Monday, August 16, 2010

Coase theorem at work: green energy and litigation avoidance

From MR comes a link to a fascinating piece. Coase got his Nobel in part for showing that it doesn't matter whether you assign property rights to polluters or non-polluters so long as they can costlessly* pay each other for good behavior. Wind power is not usually seen as a polluter, but there is a law in Oregon against noise pollution. "In a region where people often have to holler to be heard over the roar of the wind across the barren hills, they say it is the windmills that make too much noise."

In response,
Patricia Pilz of Caithness Energy, ...  is making a tempting offer: sign a waiver saying you will not complain about excessive noise from the turning turbines ... and she will cut you a check for $5,000.
“Shall we call it hush money?” said one longtime farmer, George Griffith, 84. “It was about as easy as easy money can get.” Mr. Griffith happily accepted the check, but not everyone is taking the money.

* - Costlessly is the big assumption. Much of the rest of his Nobel came from showing the importance of transaction costs and that it is NOT costless to do this kind of arrangement.

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